Wednesday, March 16, 2011

When a Democrat needs to reform public employee pensions

Public employee unions are really going to have be out there protesting pension reforms around the country because so many states are facing unfunded pension liabilities. And not all those states are run by Republicans who can be demonized as Mubarak. So the unions are going to have to fight for their political lives in Democratic states as well as in states governed by Republicans.

That is what is happening in Maryland right now. Maryland is facing a $19 billion unfunded pension liability and $16 billions in health liabilities for retirees health benefits. Those are not pretty numbers. Democratic governor Martin O'Malley ran for reelection by not discussing this looming crisis and pushing the problem off to a commission. But now he's proposing reasonable reforms.
Faced with unsustainable payments, the governor has taken to heart the commission's recommendation to adjust benefits for current workers. Benefits that have already been accrued will be untouched, but the plan would offer employees a choice: Keep the current benefit level and pay a greater contribution (7 percent of salary, up from 5 percent) to help fund it, or continue to pay the current contribution and accept a slightly lower benefit.

New employees will be required to contribute 7 percent of their salaries and will be given the lower benefit level. Other changes include increasing the vesting period (from five years to 10), increasing the early retirement age (from 55 to 60), and linking cost-of-living adjustments to inflation and pension fund performance for future retirees.

The state's huge unfunded pension liability cannot be addressed effectively without changes for current employees. But the changes being proposed are hardly draconian or unfair. Employees in the private sector are facing similar challenges: Many employers have discontinued matching 401(k) contributions, and very few private-sector employees have a guarantee of future benefit levels.
So do the public employees recognize that Maryland is facing an unbearable situation that needs to be reformed and that the Democratic governor is proposing something reasonable and work cooperatively with him?

Of course not! That's not how they roll. They have to block any bit of reform as if were being proposed by Adolf Hitler trying to shut down unions. And so they're taking to the streets in Maryland to protest having to make contributions to their own pensions.
Thousands of union members rallied before the State House on Monday night, vowing to protect their employee pensions and public school funding.

Protesters filled Lawyer’s Mall, immediately in front of the State House, where they stood among the shrubs planted in front of the governor’s mansion and packed Bladen Street.

Taking part were members of the state’s largest unions, including the American Federation of State, County and Municipal Employees and the Maryland State Education Association, which represents teachers. They rang bells, banged plastic thunder sticks and chanted “Keep the promise.”

Gov. Martin O’Malley has proposed changes to address a troubling $19 billion in unfunded pension liabilities and $16 billion in retiree health liabilities. It would require increased contributions from state employees.

“This is the guy that likes you, and look what he’s doing to you,” said Thomas Corkran, a retired corrections maintenance officer, who spent 21 years teaching Maryland inmates to do repairs on state buildings.
Yeah, well everyone is suffering. Private employees are facing pink slips. Having a 401(k) that employees have to contribute to is common practice in the private sector. These employees protesting in the streets of Annapolis have to recognize that the magic gravy train is off the tracks. Even Democratic governors can recognize this.

3 comments:

tfhr said...

I wouldn't hold out too much hope for O'Malley's proposal - not in this terminally blue state. And even though the Governor sounds like he's had a near epiphany, he's also bandying a proposal to raise the gasoline tax another ten cents per gallon and/or raise automoble registration fees by 50%. That sort of economic self destruction is being mirrored by Maryland Senate leadership too - there is a movement to raise gasoline taxes to 35¢ per gallon or double the current rate in Virginia. Brilliant!
http://www.washingtonpost.com/wp-dyn/content/article/2007/05/14/AR2007051401577.html

I don't suppose any of our legislators will ever be willing to propose, much less support, a law that would specify that their own salaries could be drawn soley from whatever surplus existed in the state's coffers at the end of each fiscal years.

pumping-irony said...

tfhr, we saw in the California example - when things got so bad that some recipients of government payments had to be paid with IOUs - who got money and who did not. Seniors, the disabled, welfere recipients, taxpayers all got IOUs. Politicians and their cronies still got paid in cash. What a surprise. It's likely that your proposal about political salaries will take flight right after pigs, bears and Obama's hi-speed rail does.

tfhr said...

pumping-irony,

My proposal would be thrown immediately beneath the wheels of the nearest means of public transportation - and that's the closest I'll come to ever using it around here.